Preparing for Compliance 2.0

If your credit union’s compliance officer still acts as little more than a watchdog, barking directives about what you can and can’t do, he or she may be taking unintended bites out of your future member service capabilities and competitive positioning.

In an environment characterized by a plethora of new laws and burgeoning enforcement actions, compliance officers today must operate as business catalysts, helping their credit unions grow within the rigors of a rapidly changing regulatory landscape, according to Andy Greenawalt, founder and CEO of Continuity Control, a New Haven, Conn., financial technology firm.

“Compliance officers must look at things with a critical eye and have a mindset of possibilities,” said Greenawalt during his Wednesday webinar titled “Compliance Officer 2.0 - Are Your Ready?”

The evolution of the compliance officer’s role from that of thinker and researcher to one of enabler and leader represents a sea change in the role that compliance officers must play in the emerging regulatory environment, Greenawalt said. Much of that change is dictated by the attitude of the regulators themselves, who have stepped up enforcement.

“Examiners are getting tired of ill-framed and poorly organized reporting,” Greenawalt told webinar participants. “They want articulation, and the lack of it is what agitates the beast, what pokes the tiger.”

New regulations continue to percolate at a steady pace, but the number of enforcement actions among financial institutions, including credit unions, have spiked in the past 10 years, now averaging between 150 and 200 actions per quarter compared to around 25 a decade ago, said Greenawalt.

In the past year, incremental compliance costs per quarter have risen to $43,493 per institution in third quarter 2013, up from $26,040 in the third quarter of 2012, according to combined financial regulator data.

The growing compliance requirements also have become costlier for smaller institutions, some of which lack the resources to address demand. While big banks seem better able to roll with the punches, smaller institutions struggle under the increasing regulatory weight. Greater integration of the compliance function into the daily operating environment is critical to making the most from limited resources, Greenawalt added.

“Today, compliance officers have to look at their jobs very differently,” Greenawalt said. “Compliance officer 2.0 is the integral role in the business of banking, and the business of banking isn’t possible without it.”